I have a modeol which I'd like to ultimately trade on a propritary basis but may also be good to land an an alpha stream. It trades a single instrument using a stat-arb type of underlying strategy. The instrument has limited daily volumne; ~2mn shares, average ~300k turnover.

In terms of managing how much of that liquidity I take. What's the suggested approach? My current thinking is that I'll build a custom portfolio consutruction model that will use a rolling window of average daily volume and then only take a threshold of that; i.e. basically equal-weighting + a cap. I suspect it would need to be tuned out of sample so as to determine the point at which the market makers get their panties in a twist... Or, is this better handled by a custom execution model that tries to take a certain amount of stock within a bounded price and time frame?

Do I need to bother with this for an AlphaModel? My understanding is that we generally only need to emit insights there and I'd prefer to keep that alo as pasimonious as possible given it probably needs some human based analysis/review.